Social Impact Initiatives-As a digital, peer-to-peer, decentralized, distributed ledger, blockchain has the potential to transform systems and enable solutions we never thought possible. As with any developing technology, there are challenges to address — but initiatives within the social impact space are already demonstrating some of blockchain’s advantages over traditional solutions.
Reducing Risk And Fraud
The OECD reports that an estimated 20-25% of funds are lost to corruption globally at the government level. Even when it’s unintentional, waste, inefficiency and misallocation of funds cost millions of dollars that could otherwise be used for good.
One advantage blockchain has is that it’s tamper-proof. Through a process known as “consensus,” each transaction is verified by multiple parties independently. Entries are immutable, meaning they can’t be modified, and can only be updated by adding an addendum. With all entries publicly viewable, this offers unparalleled transparency into how donations are used. Not only does this build trust between an organization and donors, but it helps mitigate the waste and fraud that has historically been a part of charitable giving.
Transparency And Accountability
Blockchain-based philanthropy is also addressing social causes that haven’t been well served by traditional systems. Research shows that trust and confidence in charities has dropped. Donors want to see more accountability and assurance that their contributions are making a difference. Tracing funds from the point of donation is a major benefit blockchain can offer.
Alibaba, China’s e-commerce conglomerate, developed a blockchain-based donation system called Charities on the Chain. It records donations from Alibaba’s users and lets charities, auditors, donors, media and other parties track information on how donations are being used.
Reducing Administrative Costs
Administrative costs have been a point of contention with charities; in some cases, overhead is higher than what is passed along to recipients. One administrative expense is the need for legal and financial intermediaries, which cost time and money. I work in smart contracting, which is a blockchain application intended to digitally facilitate or verify the negotiation or execution of a contract. In my experience, smart contracting can help charities reduce the need for these intermediaries.